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Surplus-Food Program Ended; Poor Sales, High Cost Cited

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Washington--The Agriculture Department, citing poor sales and high administrative costs, has decided not to renew a two-year-old program that enables schools to receive government-surplus food after it has already been converted into products suitable for use in school-lunch programs.

The department entered into an agreement with private food processors in June 1983 to convert free dairy commodities and honey provided by the government into various end products through what became known as the National Commodity Processing system.

The program allowed schools that received the free bulk food to contract directly with processors to convert the foodstuffs into menu items--for example, using free cheese to make pizza--according to Marshall Matz, lobbyist for the American School Food Service Association.

With the ncp program, he said, private food processors could receive the free food directly from the Agriculture Department, process it, then send it to the schools. With the federal program's demise, he said, schools in states that have no similar program will have to take shipment of the food and then deliver it to the processors.

Mr. Matz said that a large number of schools use free bulk food, and that 1981 budget cuts in school-food programs would have had "far harsher consequences" without the free food. He estimated that about 70 percent of the schools in the country participate in the ncp program.

Goals of Program

The program was instituted, federal officials said, to use an additional 100 million pounds of commodity products held in federal storage and to give processors an incentive to develop new products using bulk commodities.

But the Agriculture Department found, officials said, that the ncp neither achieved its sales goals nor reduced federal storage costs.

The May 13 Federal Register states that during the two-year period only about 40 million pounds of food were sold through ncp and that the cost of administering the ncp system "considerably exceeded savings." A spokesman for the department estimated that it could save $700,000 annually by eliminating the program.

Generated Confusion

The department also noted that most of the ncp sales were made to a small number of schools clustered in a few states and that food orders were concentrated among a few processors.

Nonetheless, schools were the largest users of the program, which was also available to outlets such as charitable institutions.

Finally, the department said that the ncp system and the state food-processing system "generated a great deal of confusion," prompting many state agencies to discontinue their agreements involving bonus dairy commodities in the belief that they were duplicative. Mr. Matz said that about half the states have their own state\processing programs, which are federally supervised but state-run.

'Pretty Disappointed'

Mr. Matz, noting that bills are pending before the Congress to extend the program for two years, said he was disappointed that the Agriculture Department could not wait until the bills are voted on to decide on the program. "We feel this will cause tremendous confusion in the beginning of the school year, by phasing out one program prior to having an alternative program in place," he said.

Though he acknowledged that the program was slow getting started, Mr. Matz said he thought that "what they're trying to do is to terminate a program before the economy of scale sets in to show how efficient the program can be."

The department said it plans to propose regulations in the near future to strengthen the state-processing program so that the elimination of the ncp program will not create gaps in services.

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